By Tyler Allen, ExploreBigSky.com staff writer
Natural gas prices in the U.S. have soared this summer,
stimulated by increased air conditioning use due to record
heat.
One of the country’s largest natural gas facilities, Henry’s
Hub in Louisiana, saw prices spike from April’s record low
of $1.85 per million British thermal units to $3.14/MBTU
in July—a 70 percent jump in cost.
“Couple [the] heightened cooling demand with decreasing
production in natural gas, and it becomes apparent that
natural gas is just as volatile of a commodity as oil,” wrote
Parker Thompson in a July 31 blog post for THB Energy
Solutions. Based in Gallatin Gateway, Energy Solutions is
one of the area’s leading geothermal installers. Thompson,
the company’s renewable energy consultant, took a look at
the rising costs and possible repercussions.
He explained that as natural gas prices fell to a 10 year
low to meet the cost of electricity, utilities switched to
using natural gas to fire power plants. Oil companies then
directed attention to extracting more profitable oil. As
natural gas reserves dwindled quickly, commodity traders
pushed the price higher and higher. By late July, natural
gas was trading at a seven-month high.
Whether the price of natural gas will continue rising
or will come back down with the coming winter is still
unsure, Thompson said.
“Either scenario could play out,” he wrote. “What this
situation further demonstrates is that fossil fuels are
merely market driven commodities.”
Thompson pointed to renewable energy as a sensible
economic solution.
“Renewable energy, on the other hand, is far less susceptible
to the energy markets. After all, the sun is providing us
constant, free energy. Once you make a capital investment
in photovoltaics, solar thermal, geothermal heat pumps
or wind turbines, you are buffering yourself from high
market volatility of fossil fuels.”
In a demonstration of that volatility, prices for natural gas
actually fell last week with the heat abating around the
country.
Additionally, the peak of the coal-to-natural gas switch is
“probably behind us,” for the season, according to Addison
Armstrong, senior director of market research at Tradition
Energy, quoted in the Wall Street Journal’s Market
Watch. This means that utilities will be burning more coal
to produce energy at least in the short term, and the price
of gas will continue to fall. But a cold winter could drive
the price of natural gas back up if there is a heavy heating
demand.
While fossil fuel markets have been “on a roller coaster
ride in the last 10 years,” the financial return on renewable
investments can be as high as 20 percent, depending on
the system type and design, Thompson noted. The Federal
government is offering 30 percent tax credits on renewable
energy investment through 2016, making investing in
renewables more reliable than the stock market or hedge
funds, he said.
To see the full post visit thbes.com/blog.
